The recently released 2020 St. George Home Buying Report found two thirds (64%) of first home buyers expect to face financial hurdles leading up to their first property purchase, including the most common difficulty, being the accumulation of a deposit (50%).
Close to half (48%) are saving more to buy in their desired area, and nearly three in every ten first home buyers are struggling to find a property that suits their needs.
In response, Westpac-owned St George Bank has slashed its lenders mortgage insurance (LMI) charges to just $1 for qualified first home buyers borrowing up to 85% of the property value despite heightened economic uncertainty during the pandemic.
St. George General Manager, Ross Miller, says, “By reducing the expense of Lenders Mortgage Insurance, first time purchasers may be able to afford a property that meets their needs sooner and save thousands of dollars.”
The St. George research found that one in every 10 Australians looking to buy a home are doing so for the first time and that the COVID-19 pandemic has made one third of Australians want to save for that goal quicker.
Benefits available to upgraders too
In acknowledgement of the challenges shaped by the pandemic, a leading credit union has gone a step further by slashing LMI obligations for essential workers regardless of whether they are first-time borrowers or not.
Through Community First’s Community Support Employees home loan offer, eligible, essential front-line workers such as nurses, firefighters, police force employees, ambulance officers and teachers can borrow up to 90% of the value of a home without the need to pay LMI.
Protection for the lender, not the borrower
Let’s be clear as day: Lenders’ Mortgage Insurance, or LMI, is an insurance that protects the lender, not the borrower against a shortfall in the sale of the home and the outstanding loan amount should they default on a loan, explains John Tancevski, Chief Executive of Community First Credit Union.
“LMI is usually levied on a borrower if they take a loan of more than 80% of the home’s value.
“LMI is a one-off payment made by the borrower at the time of the loan settlement, and this fee can add many thousands of dollars to the size of the mortgage.”
Generally, for a family home with a property value of $650,000 a buyer would also be looking at a one-off payment of more than $6,000 for the cost of LMI if they had less than a 20% deposit, according to numbers crunched by St George.
John concludes, “Our home loan offer is available to eligible vital essential services workers on owner-occupied properties and could save them many thousands of dollars.”